GO
Loading...

W.Coast refiners barely slipped in week of Calif. gasoline spike

Thursday, 11 Oct 2012 | 3:56 PM ET

* EIA data sheds little light on gasoline price spike

* Refiners see small dip in plant utilization

* Gasoline inventories down 231,000 barrels on West Coast

Oct 11 (Reuters) - West Coast oil refiners saw only a small dip in operations last week and gasoline inventories were little changed, according to government data that shed little new light on the unprecedented spike in California gasoline prices.

The wholesale premium for California's special type of ultra-clean gasoline surged by more than $1 a gallon last week to a record high, a spike traders say was triggered by a supply squeeze caused by unexpected refinery glitches, low stockpiles and the coming switch to winter-grade gasoline.

While so-called CARBOB premiums have tumbled this week just as quickly as they rose, questions over what caused the abrupt spike continue as state politicians call for a federal investigation into possibly nefarious trading.

The Energy Information Administration's (EIA) weekly supply and demand report, compiled from a legally binding survey covering almost all West Coast refined fuel producers, provides a partial glimpse of fundamental supply conditions in the week to Oct. 5, which was one day after wholesale gasoline premiums hit their peak.

It shows that refiners in the PADD 5 region, which includes California, Washington and Oregon, as well as seven refineries in Alaska and Hawaii, saw their total utilization rate dip by 1.2 percentage points to 83 percent. That is the lowest rate since May, but still up from near 77 percent a year ago.

That slight drop in utilization corresponds with a glitch at Exxon Mobil Corp's 149,500 barrels-per-day (bpd) refinery in Torrance, California - which accounts for 4.8 percent of the West Coast's refining capacity. On Oct. 1, the refinery suffered a blackout that traders say spooked the market.

Exxon began restarting the refinery a day later and said operations were restored by Friday. Further work on the refinery's flare systems were completed on Thursday, according to market sources, allowing the plant to reach full production.

Other parts of EIA's data, however, are harder to explain away. The report does not break out details by state or provide specific information on grades of gasoline under consideration. But it shows that net production of finished motor gasoline by refiners and blenders actually rose last week to 1.57 million barrels-per-day, suggesting that other plants may have compensated for any outages.

Overall, West Coast (PADD 5) gasoline stocks fell just 231,000 barrels last week to 26.4 million barrels, their lowest since mid-August, according to the EIA, one week after the Chevron Corp refinery in Richmond, California, lost its main refining unit.

This could be especially misleading in the coming weeks following California Governor Jerry Brown's decision on Sunday to allow an immediate switch to "winter-blend" fuel.

"We have a transition to winter-blend three weeks earlier than usual and as a consequence the EIA data is not going to be as accurate as usual," said Joe Arsenio, Managing Director of Arsenio Capital Management in California. "I think because of that, comparing year-over-year or sequentially won't be too good."

Moreover, because of California's specific fuel qualities, gasoline produced in nearby states cannot be sold in the state's gas stations. California refiners also export to Mexico gasoline that does not meet the state's stringent standards, which may have further distorted the weekly government data.

"CARBOB was tight, all other grades of gasoline were well supplied," said one trader, who asked not to be identified.

Throughout the week, traders said the shortages were concentrated in the Los Angeles area and seemed affect one refiner, Tesoro Corp , which was caught in "short squeeze" by its competitors.

"That's a weekly change in inventory and doesn't address some physical players getting caught short that did lead prices up," said another trader.

On Thursday, gasoline's differential in the Los Angeles wholesale market was up 4.5 cents from Wednesday's finish.

"It's highly likely that retail prices are being held high arbitrarily," Arsenio added.

(Reporting by Selam Gebrekidan and Erwin Seba)

((jonathan.leff@thomsonreuters.com)(+1 646 223 6068)(Reuters Messaging: jonathan.leff.thomsonreuters.com@reuters.net))

Keywords: CALIFORNIA GASOLINE/